In United States v. Milheiser, --- F.4th ---, No. 21-50162 (9th Cir. 2024), the Court vacated six defendants’ convictions for mail fraud and/or conspiracy to commit mail fraud arising from the defendants’ sales companies’ tactics in selling printer toner, and remanded.
The thrust of the Government’s case was that a sales company representative would call a business, falsely imply that the sales company was the business’s regular supplier of toner, and falsely state that the price of toner had increased. The representative would then state that the business could lock in the old price by purchasing more toner that day. The Government argued, and the jury was instructed, that if the defendants had made a misrepresentation that would be expected to and did cause a business to part with money, that constituted fraud. The defendants argued that this theory of fraud was overbroad because it permitted the jury to convict even though all of the businesses received the toner they ordered at the agreed price.
The Court agreed with the defense:
We agree with the Second, Eleventh, and D.C. Circuits that not just any lie that secures a sale constitutes fraud, and that the lie must instead go to the nature of the bargain. That rule is consistent with our holding in Yates that the right to accurate information or to make an informed business decision does not constitute something of value under the federal criminal fraud statutes, 16 F.4th at 265, and with our holding in Bruchhausen that deception does not amount to fraud simply because it results in money changing hands, 977 F.2d at 467-68. The nature of the bargain requirement properly excludes from liability cases in which a defendant’s misrepresentations about collateral matters may have led to the transaction but the buyer still got the product that she expected at the price she expected. A misrepresentation will go to the nature of the bargain if it goes to price or quality, or otherwise to essential aspects of the transaction.
Under those principles, the Government presented an overbroad theory of fraud to the jury. The Government argued that a conviction for mail fraud requires only that a defendant make a false statement that would be expected to and did cause someone to turn over money—not that the false statement went to the nature of the bargain.
The jury instructions did not remedy the problem. The instructions did not tell the jury that, to support a conviction for fraud, a false statement must directly or indirectly deceive the victim about the nature of the bargain. Although Defendants requested such an instruction, the court declined to give it. Rather, the instructions stated that a misrepresentation was material if it “had a natural tendency to influence, or w[as] capable of influencing, a person to part with money or property.”
